A Question Only Beijing Can Answer

July 06, 2004

By Bruce Einhorn It's unclear just how many Hong Kong people turned out at a massive antigovernment march on July 1. The numbers range from under 200,000 to more than 500,000. But one thing is clear. The big rally, in which people took to the streets on the hottest July 1 on record, was the biggest setback yet for the Chinese government as it tries to cope with the growing demands for democracy in the former British colony.

A year ago, when about half a million people turned out for the protest, Beijing and its supporters could claim that people were marching for reasons that had little to do with democracy. "Hong Kong was probably at its lowest point around July 1 last year," says tycoon Gordon Wu, the chairman of Hong Kong-based infrastructure developer Hopewell Holdings.

SURPRISE SUPPORT. Organizers of last year's march may have been in favor of democracy, but many of the protestors were angry at the government of Beijing-backed Chief Executive Tung Chee-hwa because of the way it mishandled the SARS outbreak, which worsened a recession and led to record-high unemployment. Others were furious about the heavy-handed attempts by Tung and his widely loathed Security Secretary, Regina Ip, to ram through the legislature new restrictions on civil liberties.

This year, though, the pro-Beijing crowd can't use those excuses to explain away the discontent. Hong Kong's economy is on the rebound, with growth likely to top 6%, twice what it was in 2003. The unemployment rate, while still high at 7%, has been falling steadily for more than a year. And last year, Tung's government retreated on civil-liberties restrictions, with no plans to reinstitute them in the short term.

Another key difference between last year and this year: In 2003, the demonstrators had good reason to believe that they would be able to achieve the scrapping of the proposed security laws by taking to the streets. But this year, they had no hope for bringing about any kind of political reform for Hong Kong. In April, Beijing issued a ruling that the people of Hong Kong won't be permitted to have a real election to choose the new Chief Executive when the unpopular Tung steps down in 2007.

"PARALYZED." Yet tens of thousands of people still spent a good part of a public holiday calling for democracy in Hong Kong. "We don't think for one moment that we can have democracy if Beijing doesn't want us to," concedes Christine Loh, the former pro-democracy lawmaker who now runs Civic Exchange, a local think tank. So why the protest? "People are just more politicized than they used to be," she explains.

Among the business community -- normally seen as the most pro-Beijing group because of the extensive investments of Hong Kong companies in China -- are some leaders who quietly support the pro-democracy movement. Their motivations may be more financial than political: They believe that democracy would be good for Hong Kong's economy. Tung gets little credit for the rebound that's taking place, and many business leaders fault his government for its clumsy attempts to steer the economy since coming into power in 1997.

"Hong Kong is growing in spite of the government, not because of the government," says one CEO of a top local company. "There are not a lot of happy people among the business community about how the Hong Kong economy is being managed. The government seems to be paralyzed."

ULTIMATE GOAL. Most business leaders are of the same mind as Hopewell's Wu -- they oppose universal suffrage in the near term and back Beijing. Immediate, full-fledged democracy would be disastrous for Hong Kong's economy, believes Wu. "Look at all the African countries," he says, arguing that the continent's woes are partially the result of democratic elections after the European colonial governments left the locals in charge.

Still, even Wu -- a Beijing fan -- thinks that the status quo is unacceptable. "For five years, we've done nothing" to get to universal suffrage, which Hong Kong's Basic Law, the territory's mini-constitution, says is the ultimate goal. "If, after 10 years, we've still done nothing, that's no good." The question, then, is what kind of compromise will threaten the status quo -- without threatening Beijing? Einhorn covers technology from Hong Kong for BusinessWeek. Follow his weekly Online Asia column, only on BusinessWeek Online